Retail Group Says New Overtime Rule a ‘Career Killer’

Retail Group Says New Overtime Rule a ‘Career Killer’

Industry reacts to doubling of salary threshold, otherprovisions

WASHINGTON — The U.S. Department of Laborhas finalized the rule updating overtime protections forconvenience-store, restaurant and other retail workers. The final rule,which takes effect Dec. 1, doubles the salary threshold under whichmost salaried workers are guaranteed overtime, from $23,660 to $47,476per year, or from $455 to $913 a week.

Vice president Joe Biden delivered remarks on the overtimerule and the economy in Columbus, Ohio, on May 18.

In total, the new regulation extends overtime protections to4.2 million more Americans who are not currently eligible under federallaw, the Obama administration said. The administration expects that thenew protections will raise Americans’ wages by an estimated $12 billionover the next 10 years, with an average increase of $1.2 billionannually.

“At the same time, employers retain considerable flexibilityin how they comply with the new rule, such as increasing salaries to atleast the new threshold to keep positions that are primarily executive,administrative or professional exempt from overtime pay; payingovertime for hours worked in excess of 40 in a week; or reducingovertime hours,” according to a White House fact sheet.

The regulation updates the new salary threshold automaticallyevery three years.

It also raises the “highly compensated employee” threshold,from $100,000 to $134,004, above which only a minimal showing is neededto demonstrate an employee is not eligible for overtime.

“This upper threshold was designed to ease the burden onemployers in identifying overtime eligible employees since it is morelikely that workers earning above this high salary level perform thetypes of job duties that would exempt them from overtime requirements,”the fact sheet said.

The Labor Department responded to employers’ concerns bymaking no changes to the “duties test” and allowing bonuses andincentive payments to count toward up to 10% of the new salary level,the White House said. Workers earning more than the salary thresholdare still subject to the duties test to determine eligibility forovertime.

In their comments to the proposed rule, employers argued thatchanging the duties test would be difficult and costly to implement,and the final rule leaves the existing duties test in place.

Retail Reaction

Retail-industry associations oppose the overtime regulations.

“These rules are a career killer. With the stroke of a pen,the Labor Department is demoting millions of workers,” David French,National Retail Federation (NRF) senior vice president of governmentrelations for the National Retail Federation (NRF), said in a pressstatement.

“In the retail sector alone, hundreds of thousands of careerprofessionals will lose their status as salaried employees and findthemselves reclassified as hourly workers, depriving them of theworkplace flexibility and other benefits they so highly value. And theone-size-fits-all approach means businesses trying to make ends meet insmall towns across America are now expected to pay the same salaries asthose in New York City,” he said.

“These regulations are full of false promises. Most of thepeople impacted by this change will not see any additional pay.Instead, this sudden and extraordinary increase will mean more red tapeand fewer advancement opportunities for salaried professionals. In thereal world—as opposed to D.C. conference rooms filled with careerbureaucrats and political appointees—employers and employees willsuffer the consequences of a policy rooted in pure politics,” saidFrench.

He continued, “Overtime regulations need to be sensitive tocost-of-living differences throughout the country, moderate enough thatthey don’t block the career ambitions of young people and middlemanagers working to climb the career ladder, and gradual enough thatbusiness owners can implement them without penalizing the very peoplethey were intended to help.”

Research conducted for NRF shows that the rules will forceemployers to limit hours or cut base pay in order to make up for theadded payroll costs of overtime expansion, leaving most workers with noincrease in take-home pay despite added administrative costs, the groupsaid. A separate survey found that the majority of retail managers andassistant managers whom the new regulations are supposed to help opposethe plan.

Convenience-store and gasoline-retailer groups also voicedtheir opposition to the new overtime regulations.

“NACS encourages the administration and Congress to withdrawthe regulations, re-examine the basis on which they were devised andre-issue them with a new threshold that takes into account the economicrealities facing the convenience-store industry,” said Lyle Beckwith,senior vice president of government relations for the NationalAssociation of Convenience Stores (NACS), on the group’s website.

“The final rule did not change the current job-duties-relatedtests,” the Society of Independent Gasoline Marketers of America(SIGMA) said in an email. “For salaried workers earning more than thethreshold, the duties test determines whether or not they can still beeligible for overtime compensation. SIGMA vigorously opposed changingthe duties test in the comments it filed with the department inSeptember 2015.”